FTSE down as investors look again at weak Eurozone data
BRITAIN’S leading share index edged lower yesterday as investors refocused on fundamentals, specifically weaker-than-expected Eurozone data, with the Greek debt restructuring theatricals out of the way for now.
Recession concerns increased after data showed the Eurozone’s service sector unexpectedly shrank in February, with Europe being Britain’s main market for its goods.
“The FTSE ends the trading day fairly flat off the back of lacklustre trading and average volume, as a fall in Banking and Mining Stocks offset the gains by Oil and defensive stocks,” said Mike Mason, trader at Sucden Financial Private Clients.
Banks were the biggest blue chip fallers, extending Tuesday’s weakness seen after the second Eurozone bailout for Greece failed to alleviate concerns about the debt-laden country, with the cautious mood not helped by a downgrade of Greece’s credit rating by Fitch yesterday.
Worries remain about the implementation of key austerity measures in Greece which were crucial in getting the bailout.
Royal Bank of Scotland was a big sector faller, down 3.1 per cent as investors took a cautious stance ahead of the lender’s full-year results due today.
Barclays also fell, down 3.5 per cent, albeit as the stock traded ex-dividend. Carnival and Reckitt Benckiser also traded without their payment attractions, knocking 3.5 points overall off the FTSE 100 yesterday.
The FTSE 100 index ended down 11.65 points, or 0.2 per cent at 5,916.55, retreating further from a seven-month closing peak reached on Monday, stuck in a tight trading range established earlier in February between around 5,850 and 5,920.
Miners fell back in tandem with copper prices as demand confidence was rattled by weak export data from top consumer China, as well as doubt over Greece’s ability to implement tough reforms aimed at cutting debt.
Vedanta Resources was the top blue chip faller, down five per cent as RBC Capital cut its rating for the mining group to “sector perform” from “outperform”, in part on valuation grounds, and reduced its earnings forecasts and target price.
Vedanta had added seven per cent on Tuesday on reports of a potential consolidation of both its Sterlite and Sesa Goa minorities.
Gains in integrated oils, however, provided underlying strength for the blue chips, led by BG Group, up 1.9 per cent, thanks to a steady crude price and with consolidation moves in the sector.
Royal Dutch Shell, up 0.2 per cent, launched an agreed £992.4m offer for Mozambique-focused small cap oil explorer Cove Energy, which jumped 25 per cent.
Europe’s largest drinks can maker Rexam was the top FTSE 100 gainer, up 7.4 per cent after it put its underperforming personal care business up for sale and said it would look to return cash to shareholders, sending its shares to their highest level in nearly four years.
Outsourcing firm Capita was also in demand ahead of full-year results due today, up 6.5 per cent supported by the award of a managed services contract for the training of British civil servants, worth £50m per annum for two years.
US blue chips were also modestly lower by London’s close, down 0.2 percent as concern over the weak Eurozone data countered solid US existing home sales.